OPTION GREEKS : GAMMA (γ)

GAMMA (γ)

Gamma measures the change in Delta with respect to per unit change in underlying. If Gamma value is 0.0008 that shows that my next move in delta will be 0.0008 if underlying changes by 1. So Gamma shows what will be the next change in delta with respect to change in underlying.  

Gamma important Points:

- Gamma of Option is always positive.

- Gamma of Call and Put Option is same.

- Gamma is highest at ATM and decreases as Nifty moves away.

- Gamma of Future is 0.

When you buy Call Option, Positive Gamma multiplies by Positive Quantity, hence gives Positive Portfolio Gamma. This signifies that buying Call Option means Long Gamma Position.

When you Sell Call Option, Positive Gamma multiplies by Negative Quantity, hence gives Negative Portfolio Gamma. This signifies that Selling Call Option means Short Gamma Position.

When you buy Put Option, Positive Gamma multiplies by Positive Quantity, hence gives Positive Portfolio Gamma. This signifies that buying Put Option means Long Gamma Position.

When you sell Put Option, Positive Gamma multiplies by Negative Quantity, hence gives Negative Portfolio Gamma. This signifies that Selling Put Option means Short Gamma Position.

Buy Call	Gamma Long
Sell Call	Gamma Short
Buy Put	Gamma Long
Sell Put	Gamma Short